As with pension funds elsewhere, improving transparency of operations and reducing costs are key issues for Danish funds at the moment. Technology has an important role to play in both areas, with Danish funds among the pioneers in enabling members to access information on their accounts via the internet. But the cost of technology can itself be an issue.
PensionDanmark, the Danish labour market pension fund which has almost half a million members, prides itself on its low administrative costs, but admits that it will be challenging to maintain this in the current environment. Jens-Christian Stougaard, executive assistant of PensionDanmark, says: “The very low level of interest rates and the expected relatively low stock market gains that we foresee in the years to come imply a more intense focus on costs.” Meanwhile, the fund wants to increase members’ access to their accounts.
PensionDanmark members have had online access to their accounts since 2000. More recently, they have been able to check whether their employer has paid into their pension account via their mobile phones. Members can also view
and change their investments in
the funds’ unit link system Frit
Puljevalg. PensionDanmark has implemented digital signature technology which enables members to ‘sign’ documents online, “which reduces the amount of paper being pushed around”, says Stougaard.
At the moment, the fund uses digital signature technology from Danish telecoms company TDC, but from April it is introducing support for Net-ID from Danish electronic payment services company PBS, a digital signature system already used by the majority of Danish banks – over two million Danes have Net-ID signatures. “We think the use of digital signatures on our web services is going to rise when Net-ID is implemented on our website,” says Stougaard.
ATP, the organisation that administers Denmark’s labour market supplementary pension scheme, financial sector pension fund BankPension, and Pensionskassernes Administration (PKA), a joint administration company for eight healthcare workers pension funds, all also give online access to accounts to their members.
ATP has developed a new platform for its Danish Special Pension (SP), the scheme that collected 1% of Danish salaries. The platform holds members’ money separately and enables them to direct its investment via the internet. This has been a major project costing E25m, involving the development of a new administration system and web interface for member access, as well as the implementation of a customer relationship system for member enquiries and a workflow system for managing the business processes.
The system went live as planned on 1 January and to budget, and is working well, says Peder Andreasen, vice-president of ATP. The major challenge in the new system’s development was in creating the multiple interfaces between the associated systems, including for administration and the web. There were over 25 interfaces in all, with links to the fund’s trading systems, to stock exchanges, securities portfolio management systems, to research and performance statistics provider Morningstar, and more. “The administration system for individualised accounts was not a big headache in itself, but if you put all the elements of the development together it is quite a big system,” says Andreasen.
ATP’s new system allows its members to go into their accounts and define their individual risk profiles, as well as to make in-depth analyses of various funds in terms of past performance and underlying cost structure. The performance ratings are provided by Morningstar, while ATP has developed its own system of ratings of funds’ administration costs.
“Morningstar ratings of past performance uses a system of stars,” says Andreasen. “We have developed a system of crowns to indicate the cost of the administration of a fund, with five crowns for the cheapest fund and one crown for the most expensive. People who want to evaluate funds now have both past performance and a tool to measure costs.” (ATP’s crown system has now been picked up by the Danish Stock Exchange which also publishes the figures.) Armed with this information on performance and costs, members can perform trades to redirect their investment towards those funds they find most attractive.
So far, around 10,000 members have logged on to the new website, with a few thousand actively trading investments. Although this figure is low, Andreasen expects it to rise once ATP begins advertising the new service in the near future. He sees member apathy towards thinking about their pensions the biggest hurdle the fund has to overcome.

A number of Danish and international funds have already expressed interest in acquiring the system so that they can give their members similar facilities to monitor and trade their investments. ATP is currently talking to the Danish government about this possibility. “There is a question whether the current legislation would allow us to sell the_system, but I think we will eventually get the green light,” says Andreasen.
PKA’s web interface allows its members to do ‘what-if’ simulations on their accounts, changing length of work or size of contributions to see the impact on their pension, while BankPension members can do something similar. Other facilities these funds make available online include information on investments and returns, and on the economy, as well as the ability to communicate with administration staff via email.
“The whole philosophy is transparency via shared information,” says Claus Skadhauge, head of communications at PKA. And such facilities have become important competitive weapons, along with things like optional individual investment pools and optional insurance products, in an increasingly competitive market, says Niels-Ole Ravn, managing director of BankPension. “We already face strong competition, and expect it to get even stronger as new regulations will make it easier for both individuals and companies to shift pension provider,” he says.
BankPension has three main systems – the Digitalis administrative system from Danish pensions and insurance software specialist Edlund, the Portman portfolio management system from Danish securities trading and administration system supplier Aloc Bonnier, and the bookkeeping system Concorde XAL, now known as Navision XAL. These systems, particularly the administrative and portfolio management systems, are costly, complex and a challenge to implement, says Ravn. “Because of the size of the market there is little, or even no real competition in this market in Denmark,” he says.
Like BankPension, industrial workers fund Industriens Pensionsforsikring uses the Portman system from Aloc, and is currently implementing an administration system from Edlund. The Portman system has been instrumental in reducing costs in the management of assets. Laila Mortensen, deputy director of Industriens Pensionsforsikring, says: “This system has minimised the use of manpower to make the costs minimal.” The Edlund system will enable the fund to bring in-house the handling of liabilities, which is currently outsourced to ATP PensionService.
“The cost is the most important factor when we consider whether to use technology or not,” Mortensen says. “But it is also important for us to have an administration based on the customers needs and quality.” To this end, the fund is using the internet to provide access to the workflow-based technology that it uses in its administration of claims for health and disability pensions. Members can follow the handling of their application on the internet. “The customer is therefore at all times able to see the status of their application,” she concludes.
PKA has developed its own systems for administration, using the Unix operating system and the Oracle database. Again, cost control has been a driving factor in the use of technology. “Being an occupational pension fund based on collective agreements between labour market partners, and thus with a compulsory membership, we have to demonstrate flexibility for the individual within the collective framework, good economic results, high member service, good communication skills, and last – but definitely not least – low costs,” says Skadhauge. The purpose of a joint administration company like PKA is to provide economies of scale. “IT is the key to this,” he says.